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Plans for the redevelopment of a New York racetrack/casino stalled last week amid reports that Delaware North Cos., the winning bidder, couldn’t raise the $370 million necessary to get the project started. But R. Donahue Peebles, chief executive of Peebles Development Corp. (No. 18 on the B.E. Industrial/Service 100 list with $245 million in revenues), which partnered with Delaware North on the deal, says not to count them out.
In an exclusive interview, Peebles claims that although New York state may elect to begin the bidding process anew to develop the Aqueduct Racetrack, his team has $100 million in cash and the best deal on the table. This is despite the need to restructure the terms and the other two competing bidders — SL Green Realty Corp. and Capital Play Ltd. — possibly waiting in the wings. Here’s what Peebles had to say:
BlackEnterprise.com: New York Gov. David Paterson awarded you all the contract in October 2008, and now it appears it may not be completed. What happened?
R. Donahue Peebles: The proposal was made about a year and half ago — almost two years ago — before I got involved. Delaware North was going to operate a casino there for slots and they were going to pay the state a licensing fee of $370 million. They were going to pay that licensing fee in four quarterly payments. And so in essence, it was an installment plan from day one and that was going to be about $92 million every quarter. Obviously the economic climate during that time changed.
The credit crunch made borrowing a lot harder of course. How did you get involved?
Part of the Delaware North proposal was also that they would develop a signature property and partner with a developer to build a world class gaming facility and amenities such as a hotel, restaurants, entertainment, and the like. When they submitted the bid, they didn’t have that partner, and they came and approached us. And ultimately we came together and joined forces with them this past summer. Our role was to oversee the construction, the design, the concept, and execution of the gaming facility and ultimately the construction of the amenities package.
Then the capital markets changed.
During the time period between when Delaware North did and the time of the award, the financial markets had obviously changed. The debt markets had frozen up — which is no secret. That’s happened around the country. The plan for Delaware North was that $270 million [of that $370 million] was going to be debt, so Morgan Stanley advised that [credit] should free up in six to nine months.
Was this the point when Delaware North sought to restructure the deal?
Delaware North proposed giving the state $100 million immediately, which was the equity that the team was always going to put up. The Peebles Corp. was going to put up its money, as well, by March 31. We would refinance and the balance
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